Billions Over Budget, Kemper Facility Gasification Portion Is Suspended

 

Operations and start-up of the lignite gasification portion of the Kemper County Energy Facility, marred by exorbitant delays and cost overruns, will be suspended immediately, Mississippi Power announced on June 28.

The Southern Co. subsidiary plans to continue running a combined cycle gas turbine (CCGT) plant that was completed as part of the $7.5 billion project three years ago, pending the Mississippi Public Service Commission’s (MPSC) decision on future operations.

Southern Co said the step was “appropriate” to manage skyrocketing costs, given the economics of the project, and the MPSC’s recent intent to establish a settlement docket to address matters related to the future operation of the gasifier portion of the project.

The proposed settlement docket is to be established by the commission on July 6. “The company will make any future announcements as to the status of the project based on the outcome of that process or future Commission action,” Southern Co. said.

Jack Bonnikson, a Southern Co. spokesperson, stressed to POWER on June 28 that the action is “only a suspension and not a cancellation of the gasification portion of the project.”

The MPSC has the ultimate authority for determining the project’s future, “including the possibility that the continued operation of the gasifier portion of the project may no longer be in the public interest,” he added.

Mississippi Power’s Kemper County integrated gasification combined cycle (IGCC) project was expected to be in service by the end of June, but the company had proposed it would need post in-service improvements.

And on June 21, the MPSC at an open meeting on June 21 unanimously passed a motion instructing its counsel to prepare an order pursuing potential solutions regarding the Kemper County Power Generation Facility. In a press release, the MPSC said the “Kemper Facility should operate using only natural gas.” The commission said it wanted to remove risk from ratepayers for the lignite coal gasifier and related assets, and ensure no further rate increases were incurred by Mississippi Power Co. customers.

As POWER reported, an economic viability analysis conducted by Southern Co. suggests that the Kemper IGCC is only economic in higher natural gas price scenarios. Under medium and low natural gas price scenarios, the existing Kemper CCGT, which has been generating power since August 2014, has “a lower net present value of life cycle costs than the Kemper IGCC.” One alternative was to run the plant as just a CCGT, as Southern Co. President and CEO Thomas Fanning has suggested. 

The 582-MW Kemper County energy facility is designed as an IGCC to convert locally mined lignite to synthesis gas, using novel TRIG technology to capture up to 65% of its carbon emissions. But owing to a number of technical hurdles, the project has been delayed nearly three years. It was originally projected to be placed into service in May 2014.

A monthly status report filed with the MPSC on June 5, meanwhile, shows that total project costs have now crossed $7.5 billion—a figure that factors in mine, carbon dioxide pipeline, and other accounting costs. Total costs exceed the $2.88 billion cost cap set by the MPSC by $3 billion.

The project’s original cost estimate outlined in a 2012 certificate of public convenience and necessity order was $2.4 billion, net of $245 million in grants awarded to the project by the Energy Department under the Clean Coal Power Initiative Round 2. That figure didn’t include the cost of the lignite mine and equipment or the cost of the carbon dioxide pipeline facilities.

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)